FairTax New Math
It would take another article (here is the original and discussion on it) to respond to all the bogus claims of the FairTax supporters. However, I would like to settle once and for all, as simply as possible, the dispute about the FairTax percentage--whether it is 23 percent or 30 percent.
I live in Florida. The sales tax rate is 6 percent (some counties have an extra penny but that is immaterial). If I buy something for $1.00, I pay an extra 6 cents, for a total of $1.06. Since the proposed FairTax is not an excise tax that the seller must pay no matter how much he sells the product for, but is in fact a sales tax that is added on to the price of a good, if I buy an item under the FairTax system for $1.00, I will pay an extra 30 cents, for a total of $1.30. That is a 30 percent sales tax rate. Boortz and his FairTax supporters want us to take the $1.30 and say that since 23 percent of that is 30 cents then the FairTax rate is 23 percent when in fact it is really 30 percent.
I am still with Murray Rothbard: "There can be no such thing as 'fairness in taxation.' Taxation is nothing but organized theft, and the concept of a 'fair tax' is therefore every bit as absurd as that of 'fair theft.'"
One basic problem with the FairTax people is that they don't consider taxation by the state to be legalized theft.
And what makes FairTax supporters think that all merchants will price their goods with the sales tax included in the price? That will make their goods appear more expensive than they really are. I suppose that FairTax supporters will want the state to mandate that all prices include the federal sales tax. That brings up the other basic problem with FairTax supporters--their view of the state. But that is the subject of another article.
Comments (93)
Jim Bradley
It's valid to say the tax rate is 23% as a percentage of total price as that is comparable to the income tax rate which is calculated as a percentage of income. Most sales taxes, however, are computed as a percentage of the price before taxes, not on the total figure. So for comparison sake to income taxes, the 23% is the correct figure. For tax add-on, the 30% figure is correct. They are equivalent.
The different is the same as the business practice of markup versus margin. 30% markup is 23% margin: $0.30 / $1.30 = 23% and $1.00 + 30% = $1.30.
Published: December 13, 2005 10:18 PM
Laurence Vance
23 percent equals 30 percent? The sales tax rate in any state is never given as a percentage of total price. To compare a sales tax to income taxes is to compare apples and oranges. Talking about markup and margin and inclusive and exclusive only confuses the issue--the FairTax rate is 30 percent. But even if the FairTax people that the rate is 30 percent, the FairTax still suffers from a myriad of other problems, as I have pointed out in my article.
Published: December 13, 2005 10:30 PM
Jim Bradley
Laurence -- Income Tax is given as a percentage of total income, not as a "markup over base". If you pay 40% in income tax, that's a 67% "tax rate" as calculated by the "add on" method because $0.60 + 67% = $1.00, yet the tax amount per dollar, as you can see, is forty cents. The problem is comparability of taxation as a percentage of income versus an add-on sales tax rate.
Published: December 13, 2005 11:06 PM
Jim Bradley
Laurence -- 100K income $23K in taxes. What is the tax as a percent of income? 23%. What would be the add-on tax rate? You're left with $77K. $100K/$77K = 1.30 or 30% add-on.
Under the plan, you don't pay income tax, but you DO pay sales tax. Now you have $100K you spend, but you can buy $77K worth of goods before tax or $100K after tax.
As a percentage of income (the $100K) that's 23% but as a percentage of sales price of items you buy ($77K) it's 30%. Still the same $100K of income.
That should make the above example clearer.
Published: December 13, 2005 11:13 PM
Dewaine
Is the difference between 23 and 30 percent going to change anyone's mind??
I didn't think so..
Published: December 13, 2005 11:29 PM
Paul D
I think the point is not so much the actual number (23 vs 30) as the fact that the Fair-tax shills are using trickery instead of honesty and frankness to promote their cause. An honest person would be more up-front about the downsides of his plan.
Published: December 14, 2005 5:57 AM
Jim Bradley
Paul -- Imagine a leftwing strategist (call him Mao). He (contrary to his beliefs) floats proposals to restrain the state which seem reasonable and understandable to many people. Those proposals are all shot down by libertarians who, growing in power, successfully wage a "pure logic" campaign to discredit anything but the "absolute libertarian (note there is disagreement on this as well) ideal". In the meantime Mao consolidates power and laughs you guys out of public debate by noting many problems with libertarian philosophy and promises utopia (using a libertarian tactic on libertarians).
I see no reason for commentary to unreservedly criticize proposals (or the U.S. for that matter like on lewrockwell.com) because they don't fit the libertarian utopia. The idea that "we should all complain about the weather" rather than developing methods of building shelters, is preposterous. This is like the farmer cricizing Eli Whitney: but your cotton gin doesn't wash my clothes.
Either proposals are a "step in the right direction" or they are not. If not, fine. It is not clear that this proposal is a step toward greater government power.
Ed said the following, which was simply hilarious: "Let me get this straight... a libertarian is excoriating (not just dismissing, but outright calling for opposition to) a proposal to replace a hideously progressive income tax with a mildly progressive consumption tax, because the proposal doesn't call for the abolition of government spending?
How do you get up in the morning and brush your teeth, given that your toothbrushing fails to abolish the government?"
Published: December 14, 2005 7:20 AM
David J. Heinrich
Jim,
This is all a bunch of non-sense, and these "FairTax" people are really hurting the cause by creating the impression that there is such a thing as a "Fair Tax". This system would also eliminate loopholes, and make it much easier for the State to collect money. It is no different than the Friedmanite implementation of the witholding tax: a total sham, which has and will harm us greatly to come.
Don't you see that this is just a diversion, to shift debate away from the real issue, which is that we should be striving to lower taxation, not alter the form of taxation. What would this one true "FairTax" do? Make it very easy for the State to raise taxation. It also makes enforcement of taxes much easier, meaning it makes evasion of taxes more difficult.
The entire thing is designed to be some kind of "revenue-neutral" scheme, which completely misses the point. It is nothing more than a scam -- or will be used as a scam, despite the naive nature of its proponents -- by the Senate and Congress. Thomas DiLorenzo has talked about this bait and switch scheme, More Loophole Lobbyists, Please. If these people succeed in eliminating deductions and loopholes, getting rid of all other taxes, and instituting the one big "fair sales tax", they will immediately raise tax-rates once such a thing is accomplished. It really isn't that difficult to see what the plan here is: "Sucker these stupid fools into allowing us to go to just one tax, then it'll be really easy for us to raise it, and enforce that tax".
Published: December 14, 2005 8:12 AM
Person
Wow, just when I thought you couldn't do it, Vance, you reached a new low. Okay, perhaps that counts as an "uncivil" comment. But seriously, seriously, look what Vance is now arguing.
"People claim the tax rate should be expressed as an inclusive rate for comparison. But they're wrong, because taxes are never fair, and they love the state." Huh?
I'm going to explain this one more time so that maybe Mr. Non-Sequitur can understand it: The rate is expressed inclusively so people know the burden relative to their current one. A 23% sales tax takes the same income as a 30% income tax. If you don't like the idea of people making a fair comparison between the rates because one is not normally expressed that way, that's a wee bit dishonest.
I'd like to know what Vances "real" problem with the FairTax is. Imagine that someone proposed, e.g., the "HalfTax", eliminating the income tax and cutting all government spending by over 50%. It almost sounds like Vance would respond by saying:
Here are some problems with the HalfTax:
1) It supports the idea that the state is justified. Its proponents explicitly state that they're not trying to abolish the government.
2) It would be easier for states to raise taxes since the federal take is much smaller.
3) People would have more money for rent-seeking and special privilege.
4) The government might raise taxes later. (Yes, Vance actually used that argument against the FairTax.)
5) The HalfTax is an income redistribution scheme because it keeps current programs for and transfers to the poor.
6) People will become complacent with that level of government.
7) Because of Laffer effects, the government may end up with more money.
All kinds of insanity are possible once you enter Vance's world.
Published: December 14, 2005 8:13 AM
George Gaskell
Jim, the FairTax is not a "step in the right direction" for many reasons, but the simplest is that it is not contingent on a repeal of the Income Tax Amendment. It therefore "replaces" nothing.
If this proposal were not openly criticized, and enacted more or less in in its current form, we would quickly (if not immediately) end up just like Europe and many US States with both a transactional tax and a direct income tax. That is reason alone to oppose it with everything we've got.
As for the inclusion/exclusion/margin/add-on issue, any transactional tax should be calculated as an add-on, not included in the sales price.
The reason that income taxes are calculated as a percentage of total income is that the unit of taxation is the individual, not the transaction. In other words, the income tax you pay in a given year is not wholly dependent on the fact that you earn, say, $100K. Because the unit of taxation for the income tax is the individual, the individual must offset that $100K figure with a series of deductions and exemptions. Since the income tax is (theoretically) designed to be a profit tax, not merely a tax on gross revenue (except for employees, not for the self-employed or business-owner, at least), all of the necessary expenses of operating the business that generated the income are deducted. So, if I earned $100K as a self-employed plumber, but spent $30K on tools and supplies, then my net income for tax purposes would be $70K.
If you were attempting to calculate the income tax as an add-on, in order to know what amount of income tax to pay during the course of any given transaction, you would need to know what the total amount of your deductions would be for the entire year. This is obviously not knowable at the time one earns income.
As a result, the only way to properly calculate an income tax is for the individual to begin by adding up all income to arrive at a total gross revenue for that year, then make all the deductions for expenses, then apply the tax rate to the net figure. Income taxes can only be calculated as a percentage of a total.
In contrast, in a transactional tax, the taxable unit is the transaction. Such a tax does not consider any of the deductions and operating expenses of the seller to be relevant. They are totally disregarded from the calculation. The buyer and seller only need to know if the transaction is taxable, and what the price of the good or service is. Adding the tax on to the "base" price is simpler, which is why States calculate them that way.
Published: December 14, 2005 8:14 AM
Laurence M. Vance
Of course I would support eliminating the income tax and cutting all federal spending by over 50%. Then I would seek to eliminate all other taxes and cut spending by another 50% and then another 50% and then another 50% until the government could barely operate. My real problem with the FairTax is that it doesn't lower taxes one cent, as Boortz admits in his book.
Very good explanation, George.
Published: December 14, 2005 9:36 AM
Person
Vance: All that glitters is not tax and spending cuts. Government hurts us in numerous other ways, and the FairTax attempts to address these. One way is through making people spend lots of hours preparing their tax returns. The FairTax largely eliminates this. Another way is through the diversion of activities from "stuff that satisfies people" to "stuff that satisfies the tax code". The FairTax eliminates a lot of this social engineering. (YES, it could be re-instituted later, but that's a horrible argument against it, I'm afraid. *Every* policy change is reversible.) Yet another way is through punishing investment. The FairTax removes all taxes on investments. Reduction of a few percentage points in capital gains taxes has been responsible for surprisingly large investment growth. Imagine what the total removal would do.
All of your criticisms are basically of the form "it's not perfect". If you really can't see why simplifying the federal tax code to one tax would be a tremendous boon, just because it leaves tax and spending levels the same, you're probably not even qualified to comment on these issues I'm afraid.
I think another poster put it best -- you're complaining about a cotton gin because it doesn't cook you breakfast.
Published: December 14, 2005 9:49 AM
Vince Daliessio
Person;
The only entities to which the "Fair Tax" will be a "tremendous boon" will be politicians, who will be able to dodge any and all fiscal issues for some time after such a tax is passed. As it stands, the "Fair Tax" simply shifts tax burdens around the economy without decreasing the total economic drain - that's what "revenue neutral" MEANS. The alleged "gains" from elimination of compliance and avoidance costs are wildly overstated. Large corporations and wealthy individuals will see large decreases in these costs while the rest of us poor schmucks will pay (hidden) increases in these same categories.
And to reiterate what others have said - we have (so far) resisted a national sales tax or a VAT in this country because we all see that everywhere such a tax has been implemented, it has resulted in that country's taxpayers being saddled with both a sales tax or VAT AND an income tax. The only ones not subject to this dual burden are those on welfare, and those who have the ability to deal in the black market.
Philosophically, taxation depends upon gulling the populace into accepting being robbed at gunpoint. Where the gun is pointed (head, stomach) really matters not at all - it's still a gun, but there are more and less threatening-seeming places to apply the gun. Boortz thinks this is a less-threatening place. Anyone who understands the way government really works cannot fail to understand that this is an illusion.
Published: December 14, 2005 10:06 AM
Person
The only entities to which the "Fair Tax" will be a "tremendous boon" will be politicians, who will be able to dodge any and all fiscal issues for some time after such a tax is passed.
I don't know what you mean by "dodging fiscal issues" (and I suspect you don't know either), but the only thing that benefits politicians is a complicated special-interest-oriented tax code. To make a fair comparison between alternatives, you need to compare *all* disadvantages of one to *all* disadvantages of the other.
As it stands, the "Fair Tax" simply shifts tax burdens around the economy without decreasing the total economic drain - that's what "revenue neutral" MEANS.
No, as you admit, it causes *less* of a burden while collecting the same revenue. The only question is how much that decrease in burden is.
The alleged "gains" from elimination of compliance and avoidance costs are wildly overstated. Large corporations and wealthy individuals will see large decreases in these costs while the rest of us poor schmucks will pay (hidden) increases in these same categories.
Really? If you have your own army of statistics to demonstrate this, by all means, present them to refute the analysis of American for Fair Taxation. I suspect, however, you just made that up. You of all people should understand that the compliance and avoidance costs are heavily understated. If an entire new market doesn't come into existence because of tax incentives, how does that show up in any study? It doesn't. Classic case of the seen versus the unseen. As for the bit about the rich, I don't know what that is supposed to be aside from rank populism. Lower costs get passed on due to competition. You know this already.
And to reiterate what others have said - we have (so far) resisted a national sales tax or a VAT in this country because we all see that everywhere such a tax has been implemented, it has resulted in that country's taxpayers being saddled with both a sales tax or VAT AND an income tax.
You have a novel concept of cause an effect. The *voters* causes the later policy change, not the earlier policy. The VAT doesn't cause people to support muliple taxes. Your argument would justify watching the government closely after the FairTax, not avoiding it altogether!
Philosophically, taxation depends upon gulling the populace into accepting being robbed at gunpoint. Where the gun is pointed (head, stomach) really matters not at all - it's still a gun, but there are more and less threatening-seeming places to apply the gun. Boortz thinks this is a less-threatening place. Anyone who understands the way government really works cannot fail to understand that this is an illusion.
You really believe this? You see no difference between a thief who steals $500 and a thief who makes you fill out forms for a day and then give him $500? That proves that you don't understand opportunity costs, not that you have a good argument against the FairTax.
Published: December 14, 2005 10:21 AM
Yancey Ward
Look, how you calculate the rate is irrelevant. The Fair Tax proponents must deal with the issue of multiple taxes if they want my support. The Fair Tax proposal must not only be joined with repeal of the 16th Amendment, but also be joined to passage of an amendment explicitly banning income taxes of all types. However, even with these conditions, I expect the the Fair Tax to be corrupted. How would this happen? Interest groups would press for differential prebates based on, guess what, incomes, identity politics, , or whatever pet characteristic statists wish to subsidize.
Also, this doesn't discuss the intrusiveness that will be required for enforcement. How about government agents posted in every business? Or the outlawing of all tangible currency? I am sorry, but I don't see the Fair Tax as being much of an improvement over what we have today.
Published: December 14, 2005 11:08 AM
David J. Heinrich
I had to respond to this:
"You really believe this? You see no difference between a thief who steals $500 and a thief who makes you fill out forms for a day and then give him $500? That proves that you don't understand opportunity costs, not that you have a good argument against the FairTax."
The key word there is "theft". Both are theft. Actually, robbery. Arguably, a thief who makes you fill out a form for a day then give him $500 is even worse, as he is also enslaving you for that day.
Published: December 14, 2005 11:26 AM
Vince Daliessio
Person,
I stick by what I said re; total tax burden remaining the same, simply redistributed. Nothing you have said refutes that. The assertion that the Fair Tax is somehow less of a burden is just that - an assertion. You and I have no real idea what the actual compliance costs will be, given the surety that the black market will become huge as a result. Enforcement will likely cost many times more than is currently imagined. Instead of payroll departments collecting taxes, it will be receivables. Instead of IRS agents auditing returns, they will have to form squads of federal agents to bust up major "rings" of free-trade "black-marketers". I don't need to flash statistics to prove that, just a finely-honed understanding of human nature.
As for your critique of my comment re the imposition of taxes and the dual regimes that most of Europe groans under, you clearly have forgotten how the current income tax was imposed - piecemeal, initially passed under the odious Woodrow Wilson in the run-up to the Great War, and developed largely as a group of war measures during WWI and II, accomplished by bullying and decieving the public.
There is nothing at all of value in the Fair Tax that cannot be massaged away in committee, and I will bet you $5 that 10 years after it is passed, none of the claimed benefits will have materialized.
Published: December 14, 2005 11:37 AM
Person
David_Heinrich:
The key word there is "theft". Both are theft. Actually, robbery. Arguably, a thief who makes you fill out a form for a day then give him $500 is even worse, as he is also enslaving you for that day.
Right, so a tax system that takes the same money but doesn't require people to fill out a 1040 is better. Wait, what were you trying to prove again?
Vince_Daliessio:
I stick by what I said re; total tax burden remaining the same, simply redistributed. Nothing you have said refutes that.
Then you didn't read what I said.
The assertion that the Fair Tax is somehow less of a burden is just that - an assertion.
Yeah, the claim that people spend a lot of valuable time each year filling out a 1040 or contemplating how to change their business for tax benefits is just an assertion.
You and I have no real idea what the actual compliance costs will be, given the surety that the black market will become huge as a result. Enforcement will likely cost many times more than is currently imagined. ...
If you and I have no idea what the costs will be, then we're kind of at an impasse here. So that doesn't quite help your argument. There are already enforcement costs to the current tax code. The FairTax has enforcement costs. Since you agree we have no idea what they will be, you don't have an argument, just assertions without lifting a finger to look at the actual data. Americans for Fair Taxation has spent quite a bit of time and money to research the costs of the current tax system, but hey, what's the point when we have you to assert things?
As for your critique of my comment re the imposition of taxes and the dual regimes that most of Europe groans under, you clearly have forgotten how the current income tax was imposed - piecemeal, initially passed under the odious Woodrow Wilson in the run-up to the Great War, and developed largely as a group of war measures during WWI and II, accomplished by bullying and decieving the public.
Yes, taxes go up. I know that. How this is an argument for one tax over another, I don't know.
There is nothing at all of value in the Fair Tax that cannot be massaged away in committee, and I will bet you $5 that 10 years after it is passed, none of the claimed benefits will have materialized.
So now your argument has morphed into "The FairTax is bad because it won't be implemented." First of all, that's not even an argument against it, and second, that would apply to pretty much any proposal you want. So why don't you go write an article denouncing a bill that would eliminate several federal agencies because "There is nothing at all of value in doing so that cannot be massaged away in committee, and I will bet you $5 that 10 years after it is passed, none of the claimed benefits will have materialized." Denounce every proposal to reduce the size of government because "it'll just get whittled down in committe."
One has to ask: are you against the FairTax, or just against everything?
Published: December 14, 2005 12:24 PM
Vince Daliessio
Person sez;
"One has to ask: are you against the FairTax, or just against everything?"
NOW you are getting somewhere.
What was Reagan's mantra? "Government isn't the solution, government is the problem". He left the federal government and federal spending twice the size he inherited. GW Bush campaigned for a "humble" foreign policy, and against "nation-building". 'Nuff said.
The past 25 years politically have consisted of proposal after proposal to make government smaller, less intrusive, less costly. None has ever worked. This one won't either. So why do you continue to believe in such fairy tales?
"So now your argument has morphed into "The FairTax is bad because it won't be implemented." "
Baloney. My argument is the same - there is nothing of value in the proposal that will actually be enacted. The not-so-subtle implication is that the salutary features of the Fair Tax are simply window-dressing, to be removed when the critical mass is enough to pass it. My bet was an assertion that even if passed, the supposed benefits of the Fair Tax will never materialize. I stand by that assertion, as all evidence from the past 25 years vindicates that position.
In a word, the Fair Tax proposal is worth less than the paper it is printed on. It is a cruel joke on those who believe the government could ever have any interest in intruding less into the lives of its citizens. Instead of trespassing into a relative handful of payroll departments in search of revenue with which to steal and murder, it will henceforth intrude into every economic transaction explicitly, collecting and using this information to reinforce itself. There is no way such a system can ever square with liberty. As bad as the income tax is, I argue that the "Fair Tax", despite the title, will be anything but, and will actually end up being much worse.
Published: December 14, 2005 12:54 PM
Jim Bradley
David and George -- If the "FairTax" (noting the nonsensical title) is not a step in the right direction, then that should be argued and only that should be argued. If 10 proposals for changing tax structure are reviewed, the one that comes closest to libertarian society is the one that should be argued for.
The idea that we should (after Rothbard) reject any proposal that does not call for "all taxes be done away with immediately and each of us secede into heavenly bliss of pure private property individualism right now this second" is just laughable. In that respect at least, Rothbards "everything or nothing" is liberty's worst enemy.
Most of you would be tickled pink to see 2 or 3% federal tax and you know it: but Rothbard would reject such a thing.
Published: December 14, 2005 1:34 PM
David J. Heinrich
Jim,
That is a bunch of balloney. Rothbard was never a sectarian who denied anything short of achieving the ultimate goal as being a sellout. On the contrary, he argued that anything that does actually bring us closer to libertarianism should be cheered on. However, he didn't see many things as doing that, including the witholding tax (for which he harshly criticized M. Friedman). Likewise, I don't see the "FairTax" as being a step in the right direction, for the reasons I explained above.
Person,
Dave H.: "The key word there is "theft". Both are theft. Actually, robbery. Arguably, a thief who makes you fill out a form for a day then give him $500 is even worse, as he is also enslaving you for that day."
Person:: "Right, so a tax system that takes the same money but doesn't require people to fill out a 1040 is better. Wait, what were you trying to prove again?"
I was using the comparison to compare the State to a private thief, not one tax-system to another. However, for the reasons I outlined above, I believe the "FairTax" is dangerous, because it would make it extremely easy for the gov't to raise taxes; most likely, more taxes would be piled on top of it. DiLorenzo has talked about this bait and switch tactic. Furthermore, the FairTax would also require enslavement, and numerous enforcement issues -- the FairTax of course, requires, the enslavement of various business owners. And who knows how much oversight and whatnot there would be on such.
Perhaps another critique against the FairTax is that it's making the State more efficient at collecting taxes. Even if it starts out at the same level of taxation (overall), it is absurd to thing that taxes will stay that low. It will be worse than witholding. Like making the concentration camps more "efficient".
Published: December 14, 2005 2:05 PM
Vince Daliessio
From Lew;
http://www.lewrockwell.com/rockwell/tax-reform-racket.html
"Bush himself summed up the spirit: "I am firm in my desire to get something done." What this means is he has every intention of rewriting the tax code, a process that always and everywhere involves winners and losers. Who ends up winning and losing is not arbitrary. It depends greatly on making one's presence felt within the political process.
But that is the underlying message. The public campaign does not speak of these matters. Instead, they claim that they will make taxes less complicated and more fair. The reform promises to increase incentives to save and invest, and to stop punishing people for doing things they should do and start punishing them for things they should not do. It promises to stop rewarding lawyers and tax preparers, and permit people to plan their finances on their own. It must also promise not to raise taxes on the middle class. It must also reassure the rich and not punish the poor. It must not repeal beloved deductions, but it must hammer abuses.
What all this means in practice is anyone's guess. And truly the point is not to contrive a precise plan or even to pass a plan that does all of the above. In fact, there is no way all these promises can be kept. There is no simple, fair, non-distorting way to collect $2 trillion per year from a population by force. The politicians tell us that they will find a way, that the problem is not so much the goal but the means and the process, that if we can just replace the current ways and means with a new ways and means, that $2 trillion will appear without pain or suffering. As the vice chair of the Bush panel said: "Our tax code should not scare people, should not threaten people, should not confuse people." Well, you can try this at home: go collect $2 trillion, while offering not much in return, without threatening, scaring, or confusing."
Published: December 14, 2005 2:15 PM
George Gaskell
Jim, we all understand the concept of incrementalism. We understand that there are degress of liberty, and anything that moves us in the direction of liberty (even if it will not achieve perfect liberty) should be favored. After all, much of the socialist agenda that the US has enacted over the years was done incrementally. It is the nature of democratic governments that discourages radical change. I get it. We should not let the perfect become the enemy of the good.
But this FairTax proposal is not good. It will give us more taxation. It will be added to the existing income tax, without a doubt. Until and unless it is coupled with a Constitutional amendment banning income taxes of all kinds, it is nothing but a scam and a boondoggle of the first order.
In any event, all tax debates are pointless unless you address government spending. Government spending IS taxation. They get money to spend either by taxation, by borrowing (which is merely delayed taxation), or by printing new money (which is inflation, which is basically a tax). Naturally, our government does all three.
Until we abolish fiat money, we could have the most perfect transactional tax system in the world and it still wouldn't do any good.
Published: December 14, 2005 3:01 PM
SaintEcon
Person: Why did you go and create an alter ego at Hotmail? Got tired of the guff you received when posting with your usual FairTax.org address?
Keep your strawmen and your nauseating trust of politicians to suddenly recognize ethics and hear this summation: Your ilk will not have much luck 'converting' the crowd in this forum to any new taxing scheme that does not guarantee a reduction in leviathan, especially on the grounds that we should 'trust you' that all of these wonderful benefits will spring forth -against all historical precedent, I might add.
No, you'll do better to take your cause to the Nation or the American Conservative where the statists dwell and ne'er a rotten idea was hatched...
Published: December 14, 2005 3:07 PM
Jim Bradley
David H -- Rothbard seemed inconsistent in his support of "more versus less libertarian". The following argument is logically compelling but strategically problematic (not that Rothbard's argument doesn't have excellent and valid points):
"The major problem with the opportunists is that by confining themselves strictly to gradual and "practical" programs, programs that stand a good chance of immediate adoption, they are in grave danger of completely losing sight of the ultimate objective, the libertarian goal. He who confines himself to calling for a two percent reduction in taxes helps to bury the ultimate goal of abolition of taxation altogether. By concentrating on the immediate means, he helps liquidate the ultimate goal, and therefore the point of being a libertarian in the first place...
Gradualism in theory indeed undercuts the goal itself by conceding that it must take second or third place to other non- or antilibertarian considerations. For a preference for gradualism implies that these other considerations are more important than liberty. Thus, suppose that the abolitionist of slavery had said, "I advocate an end to slavery—but only after ten years' time." But this would imply that abolition eight or nine years from now, or a fortiori immediately, would be wrong, and that therefore it is better for slavery to be continued a while longer. But this would mean that considerations of justice have been abandoned, and that the goal itself is no longer held highest by the abolitionist (or libertarian). In fact, for both the abolitionist and libertarian this would mean they are advocating the prolongation of crime and injustice."
For me, the argument against such things as "FairTax" are powerful if they are generalized into a critique against any of its variants, an argument which in essentials trumps all the others (i.e. probably best to provide a few amazingly powerful arguments and stick with those).
For instance: there is no law as broad as this that wouldn't be subject to the whims and wheretofores of all sorts of competing interest groups in Congress, and no "proposal" will ever make it past those interest groups unscathed, at that point the positives from it will likely be gutted, if not at inception, then secretly later by acts of Congress. The best course of action is to lower taxes now by cutting spending without any other change whatsoever as the body of people with which we are entrusting the passage of law are nefarious looters of the people.
It seems to me those facts trump all other considerations, even those of eliminating "dead weight costs" such as the "FairTax" proposes to do.
Published: December 14, 2005 5:43 PM
Keith G. Derrick
It really seems this blog has veered way off the track. 23% or 30% tax rate...incrementalism...etc.
The fact of the matter is the 16th Amendment will not be repealed and we will have a consumption AND income tax. (This has been correctly pointed out in some of the comments.) Crisis and Leviathan by Robert Higgs clearly explains how government grows during a crisis and never completely recedes to its previous levels; therefore, the income tax will come back.
The 16th Amendment was passed because it was argued that tariffs were hurting the poor and middle class more than the rich, so a progressive income tax was needed solve this problem. Of course tariffs were lowered, but DO remain and the marginal tax rates immediately increased. So people were burdened with tariffs AND an income tax.
I view the "Fair Tax" in the same vain as I do school vouchers. School vouchers do not get us close to liberty; they just get the government involved in private education. That is why Rothbard was against school vouchers and for income tax credits for a private education. One allows government to keep control of education and the other doesn't. Tax credits move us closer to liberty than school vouchers.
As far as economic dislocations, all taxes create dislocations. Is one better than the other? This can be argued to death. The point is that in either case people are responding to incentives placed in front of them by the government. Yes...the "Fair Tax" will create more savings which will lead to more capital accumulation, but what is the correct amount of savings? Government shouldn't answer this question through tax manipulation. Freely acting individuals should.
Published: December 14, 2005 6:32 PM
P.M.Lawrence
At http://blog.mises.org/archives/004437.asp (the next thread) I made some remarks about the real problems of gradualism. They also apply here. Suffice it to say, the only real problems stem from the psychological effects of not appearing to take things as matters of principle, and from any difficulties in finding a genuine transition.
But there are ways. The "prebate" genuinely does make everyone dependent on the government, but only in the sense that their funds are under government control. Such things can be engineered out gradually by converting that into first an entitlement from holding bonds, and then from diversifying the bonds away from being government financial instruments into true investments in constructive activity (backed by instutional and customary inheritance arrangements so that they wouldn't get eroded over time). It's effectively an updating of distributism to allow for a less agricultural economy.
It's a red herring to suppose that prebates soak the rich; it's a poor attempt to adjust for past wealth transfers that removed people's direct connection to the world's resources. It's all historical now, except for the continuing effects, so we don't see it directly but have to infer it. The distributist approach seeks to reset that side of things, to repair what Chesterton saw as "the problem with capitalism is that there are not enough capitalists".
If one did want to eliminate taxes as well - which I do - it's no counterargument to say that that is not included just here. That would be another step. Me, I would rather that such government as there was - as nearly municipal as practical - relied on what used to be called a "domain": direct rent and returns from land and activities. One can imagine land taxes being commuted for capital fees, which should be applied to land purchases rather than current revenue. Likewise municiplaities could lease out capital equipment to make it easier for people to start out on their own, the reverse of today's practice of sale and leaseback of assets that governments want to use.
But I see Professor Kim Swales's ideas a better starting place than this "FairTax". I have some discussion of them at http://member.netlink.com.au/~peterl/publicns.html, but of course a straight reading will produce the same objections - that it isn't one giant jump to a desired end with no taxes etc. Still, even though I don't discuss it there, I see it as working best as the first step in a true and achievable transition.
It seems to me to be a US cultural thing to think that reform can never get all the way to the desired end, that there must be some revolutionary step or else you will certainly fall by the wayside. For Americans, this may well be the case - but if so that is their particular tragedy and not a universal truth.
Published: December 14, 2005 9:47 PM
Person
I'm really sick of seeing ... strange ... arguments against the FairTax. Can someone give me an argument against it that can't be classified as one of the following:
1) It retains [bad component X] of the current system.
2) {Ad hominem attack against its proponents (they're statists, they have the audacity to use apples-to-apples comparisons, etc.)}
3) People will take the good parts out or try to undo it.
(By the way, for those of you not versed in rhetoric, none of the above is a valid argument against a policy proposal.)
Heck, I'd be satsified just finding such an argument in the original Vance article!
Published: December 14, 2005 10:03 PM
Phil Terry
If most buisness is small buisness why does it matter whether I spend my time and effort filling out tax forms for the IRS on income or forms for Customs and Excise showing my compliance with VAT or Sales tax? As an expat from Europe who ran my own business I think you are missing the point, tax is theft, it will be enforced and you will be forced to be your own tax collector one war or the other.
As some have pointed out you will end up with double taxation.
Published: December 14, 2005 11:03 PM
Keith G. Derrick
Taxation is theft. When people ask the wrong questions they can't get the right answers. Most of this discussion is asking the wrong questions. Who benefits? Who loses? Does the new policy proposal benefit people more or less? Does it lower costs? These questions distract from the ultimate fact that taxes are theft.
In the end voluntary transactions benefit all, compulsory transactions benefit some at the expense of others.
Published: December 14, 2005 11:05 PM
Jim Bradley
Person -- #1 and #3 are valid objections. The "FairTax" people don't make law, Congress does. And if Congress (and GW) is unwilling now to restrain spending and has come near the limit of current financing means, you can bet that changes to the "FairTax" proposal will be in the wrong direction.
It is a fantasy to believe that it will in any way pass or remain the way it has been proposed, or that it will even achieve it's objectives as if "law" can simply dictate "results". Results come from human action, not from words on paper.
For example: eliminating the dead-weight costs of income tax compliance isn't an advantage if, because of the necessity of forcing compliance on businesses, a regulatory apparatus arises that is heavily onerous.
The "FairTax" will likely lead to an increase in taxation, if not at passage, then soon after, as our ability to finance the deficit by present means is near exhausted.
The government tends to round-robin the financing method: selling bonds internationally (seems to be near the limit), selling bonds domestically (can't structurally raise interest rates that much), inflationary financing (created by the Fed buying the bonds if there are not enough buyers), or raising taxes (that would very likely happen at present to relieve pressure on other financing methods in any comprehensive "tax reform").
The proposal really should be renamed as well. Call it what it is: A Federal Sales Tax Eliminating Income Tax.
And it severely suffers from the criticism that Vince made: it does not require a repeal of the Constitutional Amendment authorizing the income tax. I bet we get both taxes over time.
Published: December 15, 2005 7:46 AM
David White
Surely the fact that the FairTax is "revenue neutral" is one of its greatest shortcomings, as it surrenders, from the outset, to the notion that government spending, which is already entirely out of control, can increase with impunity.
This alone assures that the FairTax will be an addtion to, rather than a replacement of, the income tax.
Published: December 15, 2005 8:32 AM
Person
Person -- #1 and #3 are valid objections.
No, they're not. They're really not. In #1 (retains a bad component), all you would be saying is that there's something bad attached to both sides. It doesn't show one being better. In #3 (will be undermined), you're arguing against *every* policy proposal because "someone will just try to undo it". I gave clear examples of this above. If someone proposed to cut government spending in half, you'll probably respond by saying "Well, that'll just make it easier for states to justify spending more... and it might result in more revenues for the government ... and then people might reverse the law." It hurts my head to try to understand some of these arguments (and I use that term loosely).
Published: December 15, 2005 8:44 AM
Yancey Ward
Person,
Haven't you been reading? However, lets just deal with the items 1 and 3 that you mentioned, shall we?
The Fair Tax proponents don't make a condition that the 16th Amendment be repealed before the Fair Tax takes effect, and they don't make a condition that income taxes be made explicitly unconstitutional. Why not, I ask you? The only reason that makes sense is that you and they know that such Amendments cannot be passed. It is almost as if a burgler comes into my house and I promise to show him where my hidden gold bars are, as long as he promises not to take my plasma television.
However, these objections aside, there have been numerous, solid economic arguments against the tax made by Sasha Radeta and Paul Edwards in the previous thread that neither you, nor any of your fellow Fair Tax proponents have answered in any substantive way.
Published: December 15, 2005 9:06 AM
David White
Person,
It hurts my head to try to understand how otherwise intelligent people can believe that the American welfare-warfare colossus is subject to reform. It's not. And what intelligent people need to be doing, therefore, is confronting the fact that overindulgence at home and overextension abroad doom it to collapse in the not-too-distant future and that it's long past time for the American people to take matters into their own hands -- like, say, these people are doing: www.vtcommons.org.
Published: December 15, 2005 9:13 AM
Person
Haven't you been reading?
Yes.
However, lets just deal with the items 1 and 3 that you mentioned, shall we?
The Fair Tax proponents don't make a condition that the 16th Amendment be repealed before the Fair Tax takes effect, and they don't make a condition that income taxes be made explicitly unconstitutional. Why not, I ask you? The only reason that makes sense is that you and they know that such Amendments cannot be passed. It is almost as if a burgler comes into my house and I promise to show him where my hidden gold bars are, as long as he promises not to take my plasma television.
No, it's not. It's really not. States can already raise taxes. Tariffs can already be raised. Income taxes can be hiked. That can happen right now. Claiming that they could also do that under the FairTax does not show the advantage of one policy over another. If you want to claim that the FairTax would remove some psychological barrier to taxation, without putting up additional ones, then you need to make that argument explicitly and not dance around it.
However, these objections aside, there have been numerous, solid economic arguments against the tax made by Sasha Radeta and Paul Edwards in the previous thread that neither you, nor any of your fellow Fair Tax proponents have answered in any substantive way.
I'm sorry, I thought we were talking about the Vance article. If your point is that FairTax opponents never come up with good arguments, but always pass the buck on to other people with supposedly better arguments in order to intimidate people supporting the FairTax through the appearance of "numerous arguments" ... sure, I agree. Not so sure what that proves. I guess I'm supposed to walk away from Vance's article thinking "Hey, it may have been riddled with fallacies, but at least other people have good arguments against the FairTax. That's all that matters."
Published: December 15, 2005 9:34 AM
Person
It hurts my head to try to understand how otherwise intelligent people can believe that the American welfare-warfare colossus is subject to reform. It's not. And what intelligent people need to be doing, therefore, is confronting the fact that overindulgence at home and overextension abroad doom it to collapse in the not-too-distant future and that it's long past time for the American people to take matters into their own hands -- like, say, these people are doing: www.vtcommons.org.
Okay, I can start to see your point. Perhaps reform through popular repeals of bad law is impossible. That's a fine, defensible position. But couching it in terms of a critique of the merits of one specific policy proposal is fundamentally dishonest. Just say what you mean. Don't say "The FairTax is bad because it might not be passed" or "The FairTax is bad because its proponents are a bunch of statists" because those aren't arguments against it. (I don't think you said any of that, but that's basically been the argument of many people here -- including, surprise surprise, the very blog post to which these comments are attached.)
Published: December 15, 2005 9:42 AM
Yancey Ward
Person,
One of the arguments made by every proponent of the Fair Tax is that it eliminates the income tax. However, the proponents simply assume this result. The experience of the real world suggests you would end up with both the Fair Tax and the income tax.
Also, I am not passing the buck to other debaters. I made similar arguments, myself, earlier. You and other proponents seem to assume that the purchase of an item and the paying of the tax on the purchase are two separate events. This is not reality. If I want to buy a house under the Fair Tax regime, and the listed price is $300,000, I don't negotiate with idea that I will pay $300,000 or less, but I negotiate with the idea that I will pay $369,000 or less. In other words, the market price isn't the listed price, but is the value transferred to the seller at the closing of the transaction. What does this mean? As Radeta has pointed out multiple times, it means that the vendors of final, new goods must have a margin of 23+% to survive. Any such business that wishes to remain viable and legal must have a 23+% margin of profit. All of the arguments about how the costs of inputs and such will fall due to adoption of the Fair Tax are completely irrelevant to this point. Even if all of the inputs fall in price, the final vendors will have to maintain, indefinitely, a margin of >23%, or go out of business. This means that failure of such businesses will be made much more likely than under the Income Tax regime. The Fair Tax proponents have never addressed this issue, not once, on this blog, nor anywhere else I have seen the topic discussed.
Published: December 15, 2005 10:33 AM
Person
One of the arguments made by every proponent of the Fair Tax is that it eliminates the income tax. However, the proponents simply assume this result. The experience of the real world suggests you would end up with both the Fair Tax and the income tax.
Okay, but like I've said repeatedly, this doesn't make very much sense. Would you oppose a bill to cut government size by 50% by saying "It's a bad idea because 'history shows' that all the provisions eliminating government agencies will be watered down or removed... and someone will just set those agencies back up later anyway." Somehow, I don't think you would. And like I said before, if your position is that "no change in law will accomplish anything because the politicians control everything, if voting worked it would be illegal, etc.", that's a fine, defensible position. But don't pretend like it's a critique of the merits of this specific proposal.
Also, I am not passing the buck to other debaters. I made similar arguments, myself, earlier. You and other proponents seem to assume that the purchase of an item and the paying of the tax on the purchase are two separate events. This is not reality. If I want to buy a house under the Fair Tax regime, and the listed price is $300,000, I don't negotiate with idea that I will pay $300,000 or less, but I negotiate with the idea that I will pay $369,000 or less. In other words, the market price isn't the listed price, but is the value transferred to the seller at the closing of the transaction. What does this mean? As Radeta has pointed out multiple times, it means that the vendors of final, new goods must have a margin of 23+% to survive. Any such business that wishes to remain viable and legal must have a 23+% margin of profit. All of the arguments about how the costs of inputs and such will fall due to adoption of the Fair Tax are completely irrelevant to this point. Even if all of the inputs fall in price, the final vendors will have to maintain, indefinitely, a margin of >23%, or go out of business. This means that failure of such businesses will be made much more likely than under the Income Tax regime. The Fair Tax proponents have never addressed this issue, not once, on this blog, nor anywhere else I have seen the topic discussed.
I'm suprised no one's responded to this because it's not a very good argument. It totally ignores the concept of elasticity. It's true that if you put a 23% tax on one specific item, like teddy bears, then if someone wanted to stay in business he would have to be able to persuade people to pay 23% more rather than go with the other, cheaper options, which could then result in teddy bear vendors not selling teddy bears.
But the idea of the sales tax shutting down businesses assumes people have some place to scurry off to like they do in the teddy bear case. However, the FairTax covers all services and new items for consumers. You're correct in that it would encourage, where feasible, use of used instead of new items (or consumption in other countries), meaning businesses would have to "eat" some of it, but becuase of the inelasticity across most items (and gain in demand), it can be mostly passed on, so I can't see it having much impact there.
Published: December 15, 2005 11:01 AM
Logan
Person,
How about that the FairTax is unconstitutional? Article I, Section 8 states that "The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States..." The FairTax is an excise tax, which is defined as an internal tax imposed on the production, sale, or consumption of a commodity. But it fails the uniformity test. Under Problem #10, Vance writes:
"After saying that there are 'no exclusions or exemptions' under the FairTax, Boortz specifically mentions exemptions for Internet access services and tuition."
Also, it is probably well-understood that this tax only applies to new goods, so if I buy a book at a used book store, I pay no tax. Seeing that there are already exemptions built into the existing FairTax bill, it fails the uniformity test. Therefore, the Congress is forbidden from imposing this tax in its current form (unlike the income tax, which they are able to collect because it has no such requirement for uniformity).
Published: December 15, 2005 12:17 PM
Yancey Ward
Logan,
I would argue that the uniformity test requires that if Congress taxes a hamburger at one rate in New York, it may not tax one at at different rate in Utah. However, as we have learned, the Constitution is whatever the Supreme Court tells us it is, regardless of how clear the meaning of any of the language actually is.
Published: December 15, 2005 12:40 PM
Logan
You're probably right Yancey... I was just trying to come up with something that fit into Person's conception of a valid argument. Remember, using public choice theory to discredit a policy proposal is invalid because.... he says so, I guess. We must assume that a proposal started in a political body such as the Congress will not be changed due to political pressures, according to his logic. I don't know if he supports the FairTax, but it seems that the supporters want to replace the flawed income tax system with the ideal sales tax. But how did the income tax system become flawed in the first place? Political chicanery is what changed it from a small tax on the rich to the beast that it is now. So we must look at a proposal both on how it looks in a vacuum and how it will react when put into the political stew. After all, as we have seen, the wishes of the forefathers become peverted over time.
Published: December 15, 2005 2:34 PM
Person
Logan: for (at least) the third time, if you want to argue that nothing good can come from any change of law, even a bill that would terminate several federal agencies, that's a fine, defensible position. But couching it in terms of a critique of the merits of one specific policy proposal is fundamentally dishonest. Just say what you mean. Don't say "The FairTax is bad because public choice theory says the good parts will be tossed." because it's irrelevant. That's an argument against compromising during passage, not against the FairTax. If you can honestly read my posts on this thread an claim I want you believe something because "I say so", I'm not sure how I'm supposed to have any respect for you. I've gone miles out of my way to justify each and every claim. Your ridicule is grossly unjustified.
Your point about the FairTax eventually being corrupted is essentially correct, but so what? Why don't you at least want to "reset the clock" so to speak. After all, declaring independence from England because of its oppressive laws would eventually result in oppressive laws being implemented again. So what's the point? Why advocate any policy change if someone could later reverse it? I'm still trying to see how this counts as an argument against the FairTax, or indeed, any change in the legal system.
Published: December 15, 2005 2:41 PM
David White
Person,
The point is that the FairTax will be corrupted because the state itself is corrupt. That's why this FairTax business is just more rearranging deck chairs on the Titanic. "So what" if the FairTax goes the way of everthing else that issues from the state? I'll tell you what: Quit wasting your time with this pernicious nonsense. Join the libertarian movement instead, and accept nothing less than the demise of the state, begining with the one whose demise will launch a global devolution of power the likes of which the world has never seen.
Fight for freedom, in other words, not for more free time in the prison yard.
Published: December 15, 2005 3:01 PM
Person
David_White: fourth time now: the argument that political change is pointless and hopeless is a separate argument from the merits of the FairTax proposal.
My goal is to make things better than they are now. The FairTax is an improvment. Does it abolish all that is bad? No. Nor does a cotton gin cook me breakfast. That's not the point. The point is it would be a tremendous improvment over the present system. And it is far better to have a tax system that doesn't involve me spending a lot of time just to comply, and which doesn't punish investment so severely.
Published: December 15, 2005 3:10 PM
Vince Daliessio
Person,
The problem many of us have with the "Fair Tax" proposal boils down to two points;
1)Any benefit can and will be lost in codifying the thing ("the devil is in the details"), and;
2)The Fair Tax by its name, assumes that such a distribution (federal sales tax) is inherently "fair" and non-distortive. This is incorrect. The Fair Tax will create just as many winners and losers as the current system has now.
Published: December 15, 2005 3:30 PM
David White
Person,
Last time now: the argument is separate in the way that avoiding the iceberg would have been separate from rearranging deck chairs.
Yours is an exercise in futility, as you yourself have admitted.
"So what" indeed.
Published: December 15, 2005 3:34 PM
Person
Vince_Daliessio:
If you want to attack bastardized versions of a proposal, be my guest. But that falls under "strawman". Your argument justifies at best, making sure these revisions don't happen.
And on your other point -- surely you don't believe scrapping the tax code and replacing it with one tax is just as corrupt as the current loophole-ridden system.
David_White:
I await more specific critques.
Published: December 15, 2005 3:40 PM
Logan
It seems that Person has vanquished all with his "arguments." Maybe he can share with us what a valid critique of the FairTax proposal would be, according to his stringent rules. The mark of a good debater, after all, is having good arguments for both sides. That being said, would it be a knock against the FairTax to say that since used items are exempt, that this is unfair to those who like buying new items compared to those who like Ebay or garage sales (not to mention the windfall it will give Ebay if its products are tax-exempt)? Or are issues of fairness not allowed to be discussed when talking about the "Fair"Tax? Can I just say that all taxation is theft, theft is immoral, the FairTax is taxation, therefore the FairTax is immoral? Or is straightforward logic also impermissable?
Published: December 15, 2005 3:57 PM
Person
It seems that Person has vanquished all with his "arguments."
Indeed it does.
Maybe he can share with us what a valid critique of the FairTax proposal would be, according to his stringent rules.
Okay, here's my SUPER STRINGENT, UNREASONABLE standard: you need to show how we'd be worse off after the implementation of the FairTax as advocated as compared to the present system. That sure must make it impossible to critique! Yet I haven't seen a single one that addresses this.
That being said, would it be a knock against the FairTax to say that since used items are exempt, that this is unfair to those who like buying new items compared to those who like Ebay or garage sales (not to mention the windfall it will give Ebay if its products are tax-exempt)?
No. The principle is that the tax on an item should be paid only once. Somehow, I doubt you either prefer the tax to be paid at each transfer, or drop your objections if this portion were changed. So it seems like a moot point.
Or are issues of fairness not allowed to be discussed when talking about the "Fair"Tax? Can I just say that all taxation is theft, theft is immoral, the FairTax is taxation, therefore the FairTax is immoral? Or is straightforward logic also impermissable?
Grow up. We have a tax now. We would have a tax if the FairTax bill were passed. If you want to critique the FairTax, you need to show how it's worse than the present. Not "also bad". Worse. If you can't, stay out of the debate.
Published: December 15, 2005 4:11 PM
Yancey Ward
Person,
The Fair Tax cannot be passed forward to the consumers. I suggest you read the item Paul Edwards linked to earlier. In the essay, Rothbard demonstrates that a general sales tax will be passed backward through the various stages of production until it rests, ultimately, on land rents and labor. In other words, the incomes of individuals are reduced, while, at the same time, the supply of goods is decreased. In addition, you now have a very powerful incentive for evasion, and, due to the structure of the Fair Tax, an initially easy method of doing so. In order to "stop" the evasion, the government will be forced to strictly monitor the inventories of all final goods sellers and the daily activities of all service providers. It isn't difficult to realize that, as the expected revenue fails to materialize due to black-market activity, the level of repression will rise, the rates of the Fair Tax are raised, and that the actual income tax reappears to compensate.
Not you, nor any of the Fair Tax proponents have answered these objections.
You mock the arguments of those who point out that the policy will be corrupted, but you are wrong to do so. The practicality of the policy is extremely important, and by ignoring the real problem with taxation, its level rather than its mode, you waste your time and energy.
Published: December 15, 2005 5:04 PM
David White
Person,
I'm sorry, but it's you who needs to grow up and realize that whatever the supposed merits of the FairTax, your admission that it would eventually be corrupted renders it an exercise in futility, all the more so in view of the fact that the government's current tax system, as oppressive as it is, has still left tens of trillions, and counting, in unfunded liabilities.
Which is to say that the FairTax will simply be the NextTax and that your support of it only puts you in league with the forces you are presumably fighting.
Published: December 15, 2005 5:04 PM
David J. Heinrich
Person,
That's a new one, telling someone to "stay out of the debate" if they don't debate the way you want them to. What a bunch of arrogant bs.
Published: December 15, 2005 5:22 PM
Glen
I supported a consumption based tax like the un"FairTax" through a good part of the 80s, it was upon deeper analysis and the realization that a virgin can't reform the whorehouse that I realized how bad it was. Sasha and others have pointed out some of the technical issues and more have pointed out the other problems. No one has yet to even come close to debunking these issues. Before we even begin to talk about tax reform, we MUST talk about spending reduction and abolishment of the income tax. When these issues are addressed, we can talk about how to improve the governments thievery.
Published: December 15, 2005 5:53 PM
Laurence M. Vance
This is my last word on the FairTax. Even if everything the FairTax supporters say about the FairTax is true, I still object to the FairTax because I don't think it is fair that the government impose a 23 percent tax on the purchase of new goods and services. FairTax people think it is. I think it is legalized theft. FairTax people think it isn't. We can argue all we want about the method the state should use to collect taxes, but it is all a waste of time as long as FairTax supporters think that the state taking a 23 percent cut on all transactions of new goods and services is a fair thing. I consider it highway robbery. Good day.
Published: December 15, 2005 7:50 PM
Person
This is my last word on the FairTax. Even if everything the FairTax supporters say about the FairTax is true, I still object to the FairTax because I don't think it is fair that the government impose a 23 percent tax on the purchase of new goods and services. FairTax people think it is.
No, they don't. They simply consider it better than the current system.
So that's it? You're going to end with a slanderous lie? Fitting. Your article presents no reasons to believe the FairTax is worse or as bad as the present. All you have to fall back on is "taxes are bad". Well gee, thanks for the update. But maybe after you learn marginal analysis, you can learn why some bad things are worse than other bad things, and then you would have a case against a specific change in policy.
But as long as you can just slander people who disagree with you, why bother? If that's all you have, I'll interpret that as your face-saving way of saying "I can't defend my own position." I think that's a good enough note for me to leave on.
Published: December 15, 2005 8:39 PM
Keith G. Derrick
Person,
As I posted before, you are asking the wrong questions. You are not tackling the root of the problem; therefore, this whole argument is pointless. You can argue about how the "Fair Tax" proposal makes things more efficient or lowers implicit and explicit costs, but these discussions just serve to keep our eyes off the root of the problem. That is, taxes are theft.
By getting people to ask the wrong questions the discussion is moved far away from the real problem at hand. It doesn't matter how inefficient income taxes are or how inefficient the government is in collecting them. These issues just serve to make us forget what taxes really are.
Do we really want an efficient tax system? I would much prefer it to become more inefficient so that I can keep more of my money.
By asking the wrong questions all sorts of policies are enacted. It's like saying that school vouchers are a step toward liberty when the government controls the strings. Or that "privatizing" social security is a better policy than the current one when the government can tell you where you can invest your money. These are policies that just change the rules of the game, but never get the state out. How can changing the rules of the game be beneficial in the long-run? It just changes the winners and losers.
That's why tax credits for education move us closer to liberty than school vouchers. One takes the state out of the picture, the other keeps it in.
The "Fair Tax" keeps the state involved, income tax credits do not.
Taxes can never be "fair." Or as Murray Rothbard said
Published: December 15, 2005 9:24 PM
Sasha Radeta
So even in his second attempt, Laurence M. Vance gets it wrong. He says that he is "still with Murray Rothbard", but it seems Mr. Vance is with him only in launching some catchy lines. When it comes to the essence of this discussion and economic theory, Mr. Vance is with Neil Boortz. He falls into Boortzian trap of "passing costs forward". This strange phenomenon only exists on internet blogs and in state-run school system.
As soon as you know it, someone tries to initiate fruitless and irrelevant discussion about the percentage that customer actually does not pay, and displaying total ignorance of the real danger with the "FairTax" (merciless revenue tax that applies to every seller regardless of profitability).
Well, I understand that Mr. Vance has a problem with this idea, since he didn't think of it first, but what's the deal with opening second, identical blog?
Published: December 16, 2005 5:59 AM
George Gaskell
Person,
You have demonstrated that you are particularly uncivil and ungracious. You are not achieving any of your stated goals by acting this way.
Nevertheless, in an attempt to blow away some of the frustration and anger you seem to have regarding our opposition to your favored proposal, I'll try to encapsulate my own difficulty with it.
You are acting as though the sole issue presented is this: Is a 30% retail transaction tax better, however slightly, than the current income tax system? You want everyone to fall in line, and answer the question as you pose it.
This is an age-old rhetorical device. You want to frame the issue in the way that most favors your preferred outcome. It serves your purpose of getting support for your proposal, because you believe that if you can show that the FairTax is one iota better than the current system, you will have made an airtight case for adopting it.
However, yours is not the only question raised by a discussion of tax reform. In the real world, outside of your rhetorical constraints, there are better, more important questions to answer.
There is at least one other, equally valid, way to frame the issue, one that includes considerations of the difficulty of getting measures passed in the real world, where realistically we will only have one opportunity for a long time, perhaps many decades, to make a significant change. It is this: how do we solve the problems of the current tax system?
The answer to this larger, more relevant question is simply: government spending is all-important. The problem of government spending is analagous to the problem of "the Titanic is sinking." The problem of filling out income tax forms is analagous to "the chairs on the deck are all wonky." The problem (and corresponding measure of improvement) that you are promoting is, in the context of the Big Picture, completely insignificant.
In a fiat money regime, ALL government spending IS taxation. Once you understand this concept, asking whether you'd prefer an income tax or a transactional tax is like asking whether you'd prefer the bullet to the front of your head or the back. It really makes no difference.
Even if we confine the scope of our inquiry to the narrow issue that you ahve presented, for the life of me, I cannot fathom why the FairTax does not openly advocate for a repeal of the 16th Amendment. You blithely dismiss the complaint that as long as this Constitutional rule exists, we are just one Congressional majority away from having both an indirect transactional tax AND a direct income tax.
This is a significant problem, a fatal flaw really, and one that you have wholly refused to even acknowledge. You keep using phrases that indicate that the transactional tax would be "better." Well, it would ONLY be "better," even according to your own limited and confining method of measuring improvement, if it actually REPLACES the income tax. It does not.
Published: December 16, 2005 9:27 AM
Person
George_Gaskell:
If I'm frustrated, it's because no one has really presented a good reason to oppose the FairTax. I currently think it's a good idea. I'm open to changing my mind if I see a good argument against it.
I haven't.
You say, that I have "wholly refused to acknowledge" the argument that "taxation bad". No, I haven't. Search for the words "third", "fourth", and "fifth", because I numbered each time I addressed this. Saying "taxation bad" and "legislation won't change anything" is an argument against the FairTax, but not incredibly relevant, because it equally applies to all taxes, and all legislation. But if that's your argument, you shouldn't complain about the FairTax because all taxes are equally bad; what difference does this one make? You just want me to admit that "Yeah, yeah, it's all going downhill, there's nothing we can do to change it because it'll all get ripped out in commitee or reversed later. We should just secede from society and go live in a cabin." Well, that's not going to happen.
Insofar as you actually have an argument, it's "if the FairTax passes, we will eventually have both taxes". Well, your entire argument rests on it, and your support for that position is "I assume it will happen." Don't assume it. Tell me why it *must* happen, and our efforts to stop that when the income tax tries to come back must fail. But before you do that, also show why seceding from England was a bad idea because "we would just end up with today's government". "But our government is much less oppressive today than if we hadn't..." nope, sorry, your worldview dismisses all such arguments, so you can't use that one.
Published: December 16, 2005 12:10 PM
David White
Person,
Seceding from England was of course a good idea, and had Lincoln upheld the right to do so as set forth in the Declaration of Independence, we wouldn't be having this conversation because subsequent history would have been altogether different, the centralization of power that began with Lincoln's War providing the impetus for a welfare-warfare colossus that would not otherwise exist. And simply put, that is why you should be working not to "secede from society and go live in a cabin" but to secede from the colossus, as this is the only means whereby our society can return to its roots and, with 20-20 hindsight, embark again on the road to freedom.
Not possible, you say? Perhaps. But consider how Antony Mueller concludes this excellent piece (http://www.safehaven.com/showarticle.cfm?id=4289&pv=1) on the trade deficit:
"The graph is presented in order to demonstrate that the collapse tends to come in a seemingly abrupt fashion. In other words: while the margin of creditworthiness seems quite comfortable for a considerable period of time, it is only a small step from being still highly creditworthy (a to b) to enter into bankruptcy (b to c). Once the debt levels move beyond the threshold of creditworthiness, the collapse destroys the value of the pledged assets. In the final consequence, the borrower's currency and its pledged assets, i.e. its government bonds, will become junk."
We're talking economic meltdown here, and while a period of martial law will likely follow (as an extension of the PATRIOT Act), it is only a matter of time before one or more states (probably of the "donor" variety: http://jonathanjo.castleblack.net/archives/000092.html) say enough is enough and go their own way, the last straw being the imposition of the "Emergency Recovery Act" (formerly the FairTax) to counteract the "market failure" that the collapse will be blamed on (just as it was it was blamed for the 1929 collapse).
So there you have it: (1) the reason why the FairTax will be in addition to, rather than a replacement for, the income tax and (2) the reason why secession is not only possible but probable.
You're a formidable opponent. Why don't you join us in opposing something worthy of a...Person such as yourself.
Published: December 16, 2005 4:19 PM
Keith G. Derrick
Person,
Your analogy about seceding from Britain is completely flawed.
If the "Fair Tax" is enacted, we are still not seceding from the income tax. We are merely enacting a new law without repealing an old one. The colonists didn't secede from Britain to tell them that they could still have their government here in America. That would be ludicrous. The colonists seceded from Britain to get rid of the British government.
That's why it is perfectly legitimate to oppose the "Fair Tax" on grounds that we WILL end up with a consumption AND income tax.
You can't argue in a vacuum. And this is what you are trying to do with this argument. Your terms for the argument are completely divorce of reality.
An intervention government does not arrive overnight. It creeps up over time. Read The Road to Serfdom or Crisis and Leviathan! Liberty is not obtained by more laws, but by less. Regulations beget regulations and laws beget laws.
Everyone is an entrepreneur. Some better than others. Your terms for the argument takes away this forecasting, which renders the outcomes of the debate meaningless.
Now if you want to still argue in a vacuum so be it. Let's have that debate. But remember the outcome is meaningless because you are limiting the terms of the debate. So here we go.
The consumption tax might increase savings; thereby, lowering interest rates. But so would lowering the current marginal tax rates. So which one is better? I don't know, that's completely subjective. Of course a greater pool of savings will increase the capital stock, but let's not treat capital as a big homogenous blob like the neo-classical economists do (and that's a whole different argument). Also, a huge pool of savings will allow the government to borrow even more money to finance its spending. So who will get the capital? And let's not assume that the government will just stop inflating the money supply because they have a huge pool of savings to grab from. Hmm...what else? Oh yeah, the collection of taxes. Do we really want business to collect the taxes. They are more efficient than government. I would much rather have a lifetime, inefficient bureaucrat collect taxes than an efficient business.
OK...avoidance. Which tax will be easier to avoid? The income or consumption tax? My bet is the income tax. How do you avoid consumption? Savings? That doesn't seem like a clear substitute to consumption. At least with the income tax there are ways to hide income. How do you hide from consumption? I suppose the underground economy. So which one is better?
Oh...I'm sure there is more to discuss, but arguing in a vacuum is completely useless.
Published: December 16, 2005 6:19 PM
Keith G. Derrick
Person,
I forgot to add. On page 74 of The FairTax Book Boortz says "when passed and signed into law the FairTax will repeal: The individual income tax, The AMT, corporate and business taxes, etc." He also says on page 75, "The FairTax is a replacement for (emphasis in the original) -- not an addition to -- our current federal taxes...it is simply a tax replacement."
So if Boortz can use the argument that their WON'T be two taxes (consumption and income), why can't one argue against the tax because we think it WILL end up that way?
Oh...and how can the income tax be repealed when the 16th Amendment isn't? Oh yeah...I forgot this isn't supposed to enter into the debate. It's funny how they can use it to promote their plan, but people can't use it to argue against the plan.
Published: December 16, 2005 8:49 PM
David White
This pretty much says it all: http://www.jpfo.org/fairtax.htm
Published: December 17, 2005 12:48 PM
Keith G. Derrick
David
Fantastic article! It presents many of the arguments made in this discussion, but adds many more. Of course the first argument against it is that we WILL end up with both an income and consumption tax.
Since "Person" doesn't believe this is a valid argument, let's look at the actual language of the proposal:
Sounds like an income tax to me! Even though the Fair Tax people say the income tax would be abolished they've written an income tax into the language of the proposal. And couple this with the fact that the 16th Amendment will not be repealed, I think it fair to say we WILL be saddled with an income and consumption tax!
But let us play on "Person's" terms of debate.
The article points out what most readers of the Mises site already know. That is inflation! Since the government continues to print money year after year, inflation is certainly going to continue. (Hasn't the dollar lost 95% of its value since the inception of the Federal Reserve?) The national sales tax is not indexed for inflation.
The article gives a nice example:
And in keeping in line with the housing example, this "Fair Tax" will only tax "new homes" not existing homes. This could have a devastating effect on the housing industry because new homes will be 30% more expensive than existing homes.
Finally, the "Fair Tax" puts everyone on welfare because of the basic necessities rebate the government will give each household each month. This paints the government in a positive light because they are "giving" citizens money back.
Of course this is much more in this article, but some of the other arguments run outside of "Person's" debate limitations.
Thanks for the link to this fantastic article!
Published: December 17, 2005 3:29 PM
PR
The only real merit of the FairTax plan is the reduced compliance costs. But that could also be had with a flat income tax. FairTax has the downside of double-taxing pre-FairTax savings, and in general it will have more unpredictable effects on the economy because it is such a drastic change. A flat income tax could avoid this and still give many of the benefits. So why do FairTax supporters so ardently prefer a sales tax over a flat income tax?
Published: December 17, 2005 5:06 PM
Chris Sullivan
Here's what I don't get:
In order for the family making 100k a year to pay 23k in taxes, he has to spend every penny he earns. First off, this doesn't make a very good case for the middle class being able to save up a nest egg. Secondly, this number is inaccurate because an avergae family of 4 would recieve a $25,600 poverty level spending limit bonus. This means that their taxable spending isn't 100k but 74.4k. This generates 17.1k in revenue, not 23k. But besides that, the problem is that this mentality is applied to the upperclass.
A person who makes 10 million dollars a year would normally owe about 4 million of it in income tax. Assuming the millionaire spends every penny of his 10 million, his fairtax would generate only 2.3 million dollars. In order to generate 4 million in taxes, he'd have to spend 17 million dollars, which is more than he even made.
But that's not the real kicker.
The real kicker is that as the income of the family goes up, there comes a point where the percentage they spend begins to go down. A family making 60k a year could easily spend that 50k just paying for car and apartment rent, kids college tuition etc. But in the case of the man making 30 million a year, where the bulk of taxes are collected, there's just no way he's going to spend even close to that percentage of his income. Lot's of these guys spend less than 10 million a year (which is a pretty absurd amount to spend anyways) and save the other 20 million. If they're spending 10 million, they're contributing 2.3 million in taxes, whereas an income tax of 40% takes 12 million from them. Who makes up the 9.7 million dollar difference, and can you show how it works and defend your numbers?
Lastly, assuming the supply-side idea that all this money pumped into the economy generates more wealth, which translates into more spending and thus more tax revenue, let's look at the family making 60k. His normal income tax contributes $9,000. Let's say trickle down theory works, his business does better, and as a result the family makes 10 thousand dollars extra, from 60k to 70k. This is a pretty impressive pay increase. Average Joe saves 8k of that money (since this system is supposed to encourage people to save their nestegg), and then spends everything else, all $62,000. Because FairTax doesn't tax until you spend above the poverty line ($25,600 for his family of four), his taxable spendings are $39,400. His generates revenue is then $8,372, still short of the $9000 mark the regular old income tax would bring in.
I just don't see how this system can work, unless we start relying on export taxes to carry the weight.
Published: December 18, 2005 7:53 PM
Don Lloyd
Keith,
The national sales tax is not indexed for inflation.
Nor is there any reason it should be. There is only one rate, so 23% is 23% no matter how the purchasing power of the dollar is depreciated by monetary supply inflation.
While the prebate tracks the poverty level, there are no higher rates to be pushed into by monetary inflation.
Regards, Don
Published: December 18, 2005 8:08 PM
Keith G. Derrick
Don,
"Nor is there any reason it should be. There is only one rate, so 23% is 23% no matter how the purchasing power of the dollar is depreciated by monetary supply inflation."
Your statement is exactly why it should be indexed. When prices rise from monetary inflation, people will be forced to pay more dollars in taxes. But what happens to someone that has an income that doesn't rise with inflation? Monetary inflation does not cause an increase in ALL prices at exactly the same rate. If it did there would be no reason to inflate. For example, if the government increased the money supply and all prices and wages went up by exactly 5% and at precisely the same time, then there would be no reason to inflate. Nothing has changed in the real economy. All input and output prices went up 5% and ALL wages went up 5%.
And this is why the government does inflate, because input and output prices NEVER go up exactly at the same rate. This allows some to benefit and others to lose from monetary inflation. Of course, the government is usually the one who gets the newly created money before prices start to rise for other people in the economy.
So back to the point. As prices rise in the economy people will end up paying more nominal and real dollars from the consumption tax if their wages do not keep pace with inflation. For example, I have not received a COLA or raise over the past three years. Certainly prices have gone up over the past three years. Therefore, I would be paying more for my current consumption (even if my consumption remained the same) and the taxes I pay on that consumption would be higher; thus, decreasing my overall standard of living.
All that being said, this is just one of many reasons why the "Fair Tax" should be opposed.
Published: December 18, 2005 9:18 PM
Don Lloyd
Keith,
Your statement is exactly why it should be indexed. When prices rise from monetary inflation, people will be forced to pay more dollars in taxes.
That's what already will happen. If a pre-tax price goes from $100 to $200 because of monetary supply inflation, then the add-on tax will go from $30 to $60. Why would you want something different?
Monetary inflation does not cause an increase in ALL prices at exactly the same rate. If it did there would be no reason to inflate.
No. This is like saying that a counterfeiter derives no benefit from his product. He has no reason to care about the pattern and timing of price changes.
Regards, Don
Published: December 18, 2005 10:04 PM
Keith G. Derrick
Don,
That's what already will happen. If a pre-tax price goes from $100 to $200 because of monetary supply inflation, then the add-on tax will go from $30 to $60. Why would you want something different?
If my take home pay is only $1000 a week (let's leave the rebate out of the discussion) and does not go up with inflation then I only have $740 ($1000-260) left over compared to $870 ($1000-130). It now takes me $130 more dollars to by the same good and I have less money left over. Clearly I'm worse off.
No. This is like saying that a counterfeiter derives no benefit from his product. He has no reason to care about the pattern and timing of price changes.
Precisely…because not every price rises by the same percentage and at the same time. If I make $1000 a week and spend $900 for a basket of goods and then the government doubled my weekly salary to $2000 a week (by printing more money) and prices doubled exactly when they gave me the new money, then it would now take me $1800 to by the same basket of goods. I'm still spending 90% of my income. I'm no better off! But this isn't what happens, therefore, monetary inflation benefits some at the expense of others. This is why the government inflates.
Published: December 18, 2005 10:38 PM
Keith G. Derrick
Don,
Since we are discussing on the Mises.org site I thought I would use a few quotes as examples for me previous comments.
Simply, if the prices for final goods and services rise faster than a person's wage, then they will be forced to pay higher prices and more in taxes, which will render them worse off. The "Fair Tax" does not take inflation into account.
The reason why a counterfieter gets to benefit from his counterfieting is because he gets to spend his newly created money before prices rise. So as the government counterfeits (inflates the money supply) they benefit from this newly created money and anyone else who gets it first. Thus, the consumption tax will not hurt them as much, but it will hurt the person who didn't get the newly created money and now has to pay higher prices for final goods and services (as the new money filters through the economy) AND an increase in the amount of money they have to pay in the form of a consumption tax.
Published: December 18, 2005 11:19 PM
Don Lloyd
Keith,
The reason why a counterfieter gets to benefit from his counterfieting is because he gets to spend his newly created money before prices rise.
No, he benefits because he has his newly created money to spend at all prices. He just benefits less at higher prices.
That inflation is a problem is a given. I don't see why the sales tax, with a given percentage rate, is a special problem. The normal income tax has bracket boundaries at specific dollar amounts which are attempted to be adjusted for inflation.
The Alternate Minimum Tax, (AMT), is not adjusted for inflation and this is a major problem since Congress doesn't want to give up any revenue.
Regards, Don
Published: December 18, 2005 11:47 PM
Keith G. Derrick
Don,
Inflation and the sales tax are not a special problem; but it is a problem and needs to be addressed by the "Fair Tax" proponents. The income tax brackets are adjusted, but the national sales tax isn't indexed for inflation. This is an issue.
Now as far as the counterfieter question.
No, he benefits because he has his newly created money to spend at all prices. He just benefits less at higher prices.
What do you think causes prices to rise in the economy? He spends his newly created money at all prices, but these prices don't account for the inflation that will occur AFTER his counterfieted money circulates through the economy. He doesn't pay the higher prices, he creates them. Increasing the money supply increases the price level. Prices don't just magically rise.
Published: December 19, 2005 12:14 AM
Don Lloyd
Keith,
The income tax brackets are adjusted, but the national sales tax isn't indexed for inflation. This is an issue.
Because the sales tax is a percentage, and not a specific dollar amount, it is already adjusted from the start. The amount of the tax, and the remainder, are both constant in real, inflation-adjusted dollars.
What do you think causes prices to rise in the economy? He spends his newly created money at all prices, but these prices don't account for the inflation that will occur AFTER his counterfieted money circulates through the economy. He doesn't pay the higher prices, he creates them. Increasing the money supply increases the price level. Prices don't just magically rise.
Yes, he always benefits as long as his paper and ink costs aren't too high and he doesn't get apprehended. He creates the higher prices as he spends his product. The mainstream would call counterfeiting a 'negative externality', as the counterfeiter doesn't fully experience the costs that he creates. Mises would call it an autistic exchange as the counterfeiter exchanges one state of existence for another preferred one, independent of the cost or benefit on any other party.
Regards, Don
Published: December 19, 2005 12:56 AM
Keith G. Derrick
Don,
I guess you don't understand the argument. If my wage doesn't increase, but prices do then I end up paying more for my purchases and more in taxes AND will have less left over for everything else. My real wages have decreased, so it takes more dollars to purchase the same amount of goods and I have to pay more in taxes.
Since prices do not rise in uniformity in the economy, this will happen for most people.
Here's an example from a great article on the "Fair Tax."
How can the national sales tax not hurt people living on fixed, non-inflation adjusted incomes?
Published: December 19, 2005 1:22 AM
Don Lloyd
Keith,
I guess you don't understand the argument. If my wage doesn't increase, but prices do then I end up paying more for my purchases and more in taxes AND will have less left over for everything else. My real wages have decreased, so it takes more dollars to purchase the same amount of goods and I have to pay more in taxes.
Yes, but the 'more dollars' are depreciated dollars.
How can the national sales tax not hurt people living on fixed, non-inflation adjusted incomes?
The sales tax hurts everyone, and the inflation hurts everyone that doesn't have an inflation aadjusted income, but the two hurts are not made worse in combination. There is no further adjustment that can be made that will not end up being a tax cut in real terms.
Regards, Don
Published: December 19, 2005 2:42 AM
Genie Hayes
Submitted on behalf of Dr. Laurence J. Kotlikoff
Professor of Economics, Boston University
Consultant, FairTax.org
Reviewing Laurence Vance’s Book Review
“There’s No Such Thing as a Fair Tax?
In his Ludwig von Mises Institute December 13, 2005 review of The Fair Tax Book by Neal Boortz and Congressman John Linder, Laurence Vance identifies what he believes are 3 “lies? in the book and 17 “problems? surrounding the FairTax. Being a fan of both the FairTax and Congressman Linder as well as a student of consumption taxation, I offer here a point-by-point response.
First, the alleged lies:
“Lie? #1 – “Taxes would be voluntary under the FairTax.?
Vance argues that everyone needs to buy goods and services and, therefore, everyone is, in fact, forced to pay the FairTax. This is obviously correct. But declaring that Boortz and Linder are “lying? on this point is wrong. The authors were simply saying that the public would have more discretion in the timing and amount they pay in taxes than under the current system. Today, income and payroll taxes are paid as soon as we earn money. Under the FairTax, no tax would be due until we spend what we earn.
Yes, calling the FairTax “totally voluntary,? as the authors do, is pushing literary license, but not beyond common practice. Indeed, the IRS touts the voluntary nature of our current tax system stating that “The U.S. income tax system is built on the idea of voluntary compliance. Compliance is voluntary when taxpayers declare all of their income. Taxpayers also voluntarily comply through obtaining forms and instructions, providing complete and correct information, and filing their income tax returns on time.?
No impartial reader of the book would come away thinking that the FairTax represents, in effect, the establishment of a voluntary charity for the government.
“Lie? #2 – “The FairTax rate would be 23 percent.?
Vance claims that the FairTax’s rate is really 30 percent. He’s both wrong and right at the same time. The tax-exclusive rate we’d pay at the store would, indeed, be 30 percent, but the rate that matters – the tax-inclusive rate – would be only 23 percent.
To see this, consider spending $1.00 under the FairTax on a good or service (e.g., a candy bar) whose price is 77 cents in the absence of the FairTax. In spending the $1.00, one pays 77 cents for the good or service and 23 cents (30 percent of 77 cents) in taxes. Hence, the $1.00, whether it represents a dollar of income or wealth, ends up delivering only 77 cents of consumption and, consequently, is being taxed at a 23 percent rate.
By analogy, the same can be said for the income tax. If wages of $1.00 were taxed at 23 percent, the taxpayer would have only 77 cents left to spend on consumption. Suppose we were to tax everyone’s wages at 30 percent, but also subsidize their wages at seven percent. Anyone looking at such a tax structure would say there is a 23 percent effective tax on wages.
In describing the FairTax rate as 23 percent, Boortz and Linder are quoting the rate in terms that are not only economically honest, but also permit ready and appropriate comparison with our prevailing income and payroll tax rates. Let’s assume taxable income of a sole-proprietor was $72,000, so that that taxpayer pays taxes of 28 percent plus 15.3 percent payroll taxes for a combined tax-inclusive rate of 43.3 percent. Unless Vance wants to refer to the 43.3 percent as actually a 77 percent rate, he really can’t compare that rate to the FairTax.
Vance owes the authors an apology on this one.
“Lie? #3 – “The FairTax would abolish the IRS.?
Vance reiterates what the FairTax legislation states, namely that a federal agency would be required to oversee and ultimately enforce the collection of the FairTax. If one were to call this agency the IRS, the IRS would not, in fact, be abolished. But here, again, the authors are engaging in reasonable literary license in suggesting that the FairTax would abolish the IRS.
Whether or not the tax collection agency retains the initials I, R, and S, it would be completely different from the current enforcement apparatus. For starters, we’d no longer have more than 100,000 government bureaucrats enforcing 17,000 pages of federal tax law. Second, we’d no longer have to file individual income tax returns. Third, the IRS would no longer be in a position to know virtually every detail of our financial affairs. Fourth, tens of thousand of accountants, tax attorneys, and lobbyists would no longer spend their working lives trying to decipher, comply with, modify, and avoid tax laws and IRS regulations.
So the FairTax would abolish the IRS for all practical purposes. And, more importantly, the nation would save $250 billion plus in direct compliance costs and an even larger sum in efficiency costs from eliminating the current federal tax system. Yes, the FairTax would entail collection and efficiency costs, but much lower ones. State governments, most of whom are already collecting and administering their own state sales taxes, would be charge and compensated for collecting the FairTax.
“Problem? #1 – “The FairTax hides the amount of tax being paid.?
Vance claims that the FairTax hides the amount of sales tax being paid. Not so. The receipts one would receive in making purchases would clearly indicate the price of the commodity purchased as well as the amount of FairTax imposed on that commodity. In my $1.00 expenditure example, the receipt would say Snicker’s Bar 77 cents and Tax 23 cents.
In contrast to the FairTax, the current tax system makes it very hard to understand the extent to which we’re being taxed. The current tax system constitutes not one tax system, but four – the payroll tax, the federal personal income tax, the corporate income tax, and the estate and gift tax. The later three tax systems are extremely complex. Even the payroll tax is very hard for most workers to appreciate. How many workers, for example, understand that they are, in fact, paying the employer as well as employee portions of the 15.3 percent FICA tax?
The complexity of our tax system makes it extremely difficult for any of us to understand the full extent to which we are taxed on working and saving. The need, in the end, to guess what incentives we’re facing further distorts economic choices. The costs of these distortions are significant. Indeed, they may far exceed the roughly 2 percent of GDP direct costs of complying with the current tax system.
Thus, Vance has the issue of hidden taxes completely backwards. The FairTax is the most transparent of any tax system. The current tax system, in contrast, is specifically designed to and thrives on hiding its provisions.
“Problem? #2 – “The FairTax is progressive.?
Leaving aside the rebate, the public generally views sales taxes as regressive. They reach this conclusion by comparing sales tax payments with current income. Since someone with zero current income still has to buy food to eat, the ratio of that person’s sales tax payments to his current income is infinite. In contrast, the ratio of sales taxes paid to income in the case of someone with a $1 million in current income is much smaller. So the “poor? person with zero income is paying a much larger share of his current income than is the rich person in sales taxes.
The problem with this analysis is that people don’t pay for their consumption simply out of their current income. (If they did the person with zero current income would starve.) People also pay for their consumption out of their private wealth and out of the welfare benefits, Social Security benefits, unemployment benefits, and other government transfers provided by the government. Indeed, the “poor? person just mentioned might well be billionaire Warren Buffet. How so? Well Warren’s current annual income could be zero because he’s experienced capital losses on his investments during the current year. This wouldn’t prevent him from using his billions in assets to pay for steak dinners over the course of the year in his favorite Omaha restaurant.
Rather than consider progressivity on an annual basis, economists consider progressivity on a lifetime basis by comparing the present value of remaining lifetime tax payments to the present value of remaining lifetime resources. Remaining lifetime resources includes the present values of future labor earnings and government transfer payments as well as the amount of current net financial and tangible wealth.
From a lifetime perspective, a sales tax (with no rebate) is viewed as neither progressive nor regressive, but rather as proportional. The reason is that the present value of a household’s remaining lifetime spending must equal the present value of its remaining lifetime resources. If it didn’t, the household would be able to spend more over its lifetime than it earns.
Because spending equals resources on a present value basis, taxing spending is equivalent to taxing resources. And doing so at a proportional (fixed) rate means you are taxing resources as a proportional rate. This is what the FairTax does. But the FairTax adds in a rebate, making it not proportional, but progressive overall.
So Vance is right. The FairTax is progressive. But this is a plus, not a minus. Unlike Vance, the vast majority of Americans, including the vast majority of the rich, favor a progressive tax system.
“Problem? #3 – “The FairTax is an income redistribution scheme.?
Under the FairTax households with the same demographics will receive the same rebate. But as a share of remaining lifetime resources, the FairTax is progressive, as indicated above. But this is not a problem. Any tax system acceptable to the public must be progressive.
“Problem? #4 – “The FairTax creates new tax collectors.?
Totally incorrect. Today, everyone who files an income tax return, more than 200 million taxpayers, is a tax collector. The number of taxpayers will diminish by more than 90 percent. And they will be the same tax collectors as today. In one fell swoop, the FairTax reduces the number of taxpayers at the same time it vests everyone in the tax system, by making the price of government explicit. Here Vance argues that baby sitters and similar providers of personalized services would need to collect the FairTax and mail it into the government. This is true, but it’s no different under the current system. Anyone who is self employed is required to pay self-employment tax as well as federal income tax above a certain level of income.
Although the baby sitter will go from being a “taxpayer? to being a “tax collector,? nothing real will change. Apart from the change in words, the baby sitter is in the same position of having to mail a check to the government.
“Problem? #5 – “The FairTax creates new taxes.?
Wrong. Today, we tax returns on capital, we tax sales of capital assets, we tax labor earnings, we tax estates, and we tax gifts. All of these taxes are eliminated by the taxation of the final retail sale.
Yes, currently, there are no federal taxes directly levied on the purchase of most final goods and services. But at the same time the FairTax would institute these direct taxes, it would also eliminate direct taxation of the labor and capital income received by American taxpayers. Hence, the FairTax destroys old taxes at the same time it establishes new ones. Depending on how one quantifies labor supply and saving, the FairTax could be said to reduce, on balance, the number of taxes. In any case, counting up the number of distinct taxes seems like a silly and inherently arbitrary way to evaluate the FairTax. The important point is not the number of things being taxed, but the number of rates used to tax those things. Under the FairTax all goods and services will be taxed at one and only one rate – 23 percent.
“Problem? #6 – “The FairTax creates new taxpayers.?
I sure hope so. I hope the 40 percent or so of Americans who pay no income tax today have to pay the FairTax and see that they too are vested in our government. I hope that criminals who have illegally amassed wealth in the past will pay lots of sales taxes when they spend these holdings.
What about churches and other non-profits? Their tax treatment is as it is today. They’ll pay no taxes on their income, and charge no FairTax when those sales are substantially related to their exempt function. On the other hand, if they sell consumer goods or services, they’ll have to charge and remit the FairTax on these sales.
Plus, individuals will be able to donate to their church or favorite charity tax-free.
“Problem? #7 – “The FairTax makes it easier for the government to raise taxes.?
Quite the opposite. Politically, if there is only one tax rate that everyone needs to think about and keep track of, there will be lots of interest in that one rate as well as opposition to raising it. One key objection to the FairTax is that it is too visible, meaning that it exposes the true costs of the government. This is at the same time its major strength and weakness. Exposing the true cost of the government ensures downward pressure on the size of government. But doing so makes politicians who like to hide taxes wary. Moreover, as the public digs in its heels on raising the single rate, as I suspect it would, federal expenditures would have to be restrained to live within the 23 percent rate budget. I.e., the 23 percent FairTax rate has the potential of establishing a global budget for federal expenditures, something that should be wholeheartedly supported by Vance.
Vance suggests that the rate would have to rise over time to adjust for growth in the economy. This is (excuse the pun) off base in that the FairTax tax base will itself rise with growth in the economy. Hence, revenues will keep pace with overall economy-wide growth without requiring a rise in the tax rate.
The major point he also misses is that the FairTax is global tax reform. When the U.S. is the only industrialized country in the world with a zero rate of tax on savings and investment and productive enterprise, other nations will have to follow suit or lose their citizens’ investments to the U.S.
“Problem? #8 – “The FairTax makes it easier for state governments to raise taxes.?
The states may adopt the FairTax’s broader sales tax base, but would likely cut their rates in so doing. What Vance ignores is the competition across states in attracting business and workers. This competition explains why state tax rates are relative low and are likely to remain low.
“Problem? #9 – “The FairTax has unknown and potentially huge Transition costs.?
Saying so doesn’t make it so. There is no reason to expect significant transaction costs. The inventory transition valuation issue raised by Vance can readily be sorted out.
“Problem? #10 – “The FairTax makes exceptions while claiming to have none.?
Totally incorrect. Unlike today, where the tax code is used as an effective second appropriation committee, the FairTax taxes every form of consumption expenditure that can readily be taxed without exception. The FairTax exempts educational expenditures, but educational expenditures are viewed by economists as a form of human capital investment, not a form of consumption.
“Problem? #11 – “The FairTax has a great potential for fraud.?
This is the major concern about the FairTax raised by economists and tax practitioners, but it is not based on rigorous analysis. There is every reason to believe the FairTax would reduce noncompliance from its current $300 billion level.
First, much of the $300 billion stems not from fraud, or the intentional violation of a known legal duty, but rather from mistake. The FairTax eliminates virtually all potential for innocent mistakes, and it makes it much more difficult to claim that noncompliance arises from mistakes; i.e., the simplicity of the FairTax removes the plausible deniability of fraud.
Second, the vast majority of sales of consumer goods and services and all of the sales of expensive consume goods and services is done in retail stores, whose sales tax payments could readily be monitored. As for the other transactions, we’d have the entire IRS or, whatever you’d want to call it, available to enforce this single tax. By setting very high penalties and using ad campaigns to indicate that cheating on the sales tax hurts everyone, collecting the FairTax should be straightforward.
Third, the FairTax reduces the effects of all known factors on fraud. The three factors that economists have shown to affect compliance are marginal rates, likelihood of being caught, and penalties. The FairTax enhances all three:
1) The FairTax imposes much lower average taxes on working-age households than does the current system. The FairTax’s reduction in average tax rates on the working age population reflects the broadening of the tax base from what is now primarily a system of labor income taxation to a system that taxes, albeit indirectly, both labor income and existing wealth. Consider, as an example, a single household earning $50,000. The household’s average tax rate under the current system is 21.1 percent. It’s 16.2 percent under the FairTax.?
2) The likelihood of being caught increases dramatically when the collection points decrease from 140 million to 20 or so million.
3) The FairTax imposes significant penalties on those who would commit tax fraud.
“Problem? #12 – “The FairTax will turn thousands of Americans into criminals for not collecting the tax.?
Thousands, if not millions, of Americans now cheat on their income taxes. And we have more than 150 tax penalties, several of which are criminal today. But we do perform audits and fine people for not paying. The same would occur under the FairTax. People who cheat would get caught and pay penalties. However, the FairTax has several provisions enhancing taxpayer rights.
“Problem? #13 – “The FairTax does not repeal the 16th Amendment.?
The FairTax cannot repeal the 16th Amendment, which has to be done in a separate piece of legislation. So, Vance’s point is that we must live with the income tax? Not so. The FairTax does repeal Subchapters A and C of the 1986 Internal Revenue Code that implement the income tax. Vance’s concern here is that the income tax will be restored and that we’ll end up with both the income tax and the FairTax. But if the popularity of the FairTax will, I believe, preclude that from ever happening.
“Problem? #14 – “The FairTax doesn’t repeal federal excise taxes.?
True. But not a problem. We want to retain some flexibility to tax goods, like cigarettes, the consumption of which can impose significant costs on society at-large, at higher rates. These taxes serve a different purpose than general revenues. They are in effect taxes on externalities.
“Problem? #15 – “The FairTax doesn’t lower taxes.?
Wrong. The FairTax dramatically lowers marginal rates and completely eliminates the double taxation on returns to savings and investment. And over time, the FairTax will stimulate growth and permit much lower rates of taxation than would otherwise be the case.
“Problem? #16 – “The FairTax doesn’t address the root problem that the government has no fundamental right and should have no power to tax us.?
The government has the rights we the people have given it through the Constitution. This, again, is a Vance problem, not an American problem, but he should read the Tenth Amendment of the United States Constitution, which is part of the Bill of Rights. It states: The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people. If Vance wants to strike that Amendment, he has a long way to go.
Problem # 17 – “The FairTax makes welfare universal through the prebate.?
Wrong. The FairTax simply declines to tax Americans before they have met their own sustenance in life. Nobody is taxed on the necessities of life under the plan. And nobody is required to pay for the cost of the government until they have met their own needs. I don’t consider that welfare.
Dr. Laurence J. Kotlikoff
Published: December 20, 2005 6:45 AM
Person
Professor Kotlikoff: don't waste your time. Vance will respond, if he responds at all, by saying:
1) So what, my friends and I have made better arguments elsewhere, you didn't respond to those.
2) You're a statist.
3)Taxes are bad.
Thanks for the input, but don't delude yourself into thinking it will be seriously considered by the people you're refuting.
Published: December 20, 2005 8:09 AM
scott t
Shouldnt any FairTax legislation include repealing the 16th amendment, substantial and detaied plans for a meaningful reduction in govt spending (so that 23% or 30% wouldnt matter, something along the lines of 10% maybe) and safeguards that would prevent the reinstallation of a federal income tax before any libertarian would grudgingly support it?
Published: April 17, 2006 1:37 PM
scott t
additionally, it seems that if govt is still taking in the same amount of money, or even more if what Boortz and other FairTax supporters are saying - then freedom is being diminished.
Published: April 17, 2006 1:42 PM
Person
Wow, I almost forgot about this thread. Cool, reading back on how I dominated this thread. So, does anyone yet have any argument against the FairTax other than 1) Something other than the FairTax is bad, 2) The FairTax doesn't fix everything, 3) The FairTax might be changed later, or 4) Taxes are bad? I don't think I've seen one even to this day.
Published: April 17, 2006 2:17 PM
billwald
A spammer discovered how to beat the system. A pox on anyone who buys from him.
All discussions about the income tax ignore the plain fact that the Social Security tax is and always has been a capped income tax which is used to pay current budget needs. Change the official income tax to a sales tax and the working class will still be paying an 8% income tax.
Published: November 7, 2006 12:02 PM
Sam
Instead writing articles about how taxes are bad, why don't Libertarian authors write articles on all the tax loopholes and corporate strageties to LEGALLY reduce taxable income and receive the most tax refunds from the government.
Published: December 21, 2006 4:41 AM
Sam
Here a joke to cheer up some grumpy Libertarians regarding this article:
-----
The only thing that the IRS has not taxed yet is the penis. This is due to the fact that 40% of the time it is hanging around unemployed, 30% of the time it is hard up, 20% of the time it is pissed off and 10% of the time it is in the hole. On top of that, it has two dependents and they are both nuts.
Effective January 1st, 2002, the penis will be taxed according to size.
The brackets are as follows:
10 - 12" Luxury Tax $30.00
8 - 10" Pole Tax $25.00
5 - 8" Privilege Tax $15.00
4 - 5" Nuisance Tax $3.00
Males exceeding 12" must file under capital gains.
Anyone under 4 inches is eligible for a refund.
PLEASE DO NOT ASK FOR AN EXTENSION!!!
-----
From: www.lotsofjokes.com
Published: December 21, 2006 5:53 AM
billwald
The primary problem with any federal tax is the existance of the federal government. No fed, no problem. Thus I propose dissolving the federal government, recanting the Constitution, and reverting to (now) 50 sovereign stated united by the Articles of Confederation.
Published: January 19, 2007 7:09 PM
David White
Billwald, boy did you hit the nail on the head, especially in light of Lew's post the other day on the LRC blog that showed a map of the United States, with each state named after its DGP equivalent of another country:
http://farm1.static.flickr.com/161/350816052_0a392a0d28_o.jpg
What more do you need to know than that "Russia" is perfectly capable of governing itself, as is "Bangladesh," or any of the rest?
And what more do you need to know about the "FairTax"?
Published: January 19, 2007 7:50 PM
Mark Curran
Dont worry about 23- or 30%. for fair tax. Thats like asking if the magic pills will get you 100 miles a gallon, or 1000,
The answer is -- neither. Its poppycock,
Fairtax can not possibly work. It would have to be at least 60% -- and here is why.
For one thing — it pretends to tax the federal government, to pay the federal government Boortz writes “the federal government itself becomes a major taxpayer” Page 148.
This is a farce, it can not happen. Its like me saying I will tax myself 10,000 dollars a day. Oh, I can write a check for it, I can even deposit my own check in my own account. But at the end of the month, I dont have 300,000.
Incredibly, Fairtax thinks they will have 300,000.
For example, when the Fairtax makes the US Navy pay 4 billion in “sales tax” on a 12 billion dollar aircraft carrier — the Navy can write the check, The Treasury can even cash the check But the Treasury isnt a dime ahead. The treasury had to issue the money to cover the check.
This fallacy — one of many in Fairtax — means the 23% will have to be 35%.
Another major fallacy — Fairtax pretends it will be able to tax health care. That means cancer patients, stroke victims, nursing home patients, kidnes transplant patients — all of them will get huge tax bills. One cancer patient could easly get a tax bill for 50,000 in sales tax on their surgery and chemo,.
A single nursing home patient could easily be charged 25,000 in sales taxes per year. The parents of a child with luekemia could be charged 50,000 sales tax on expensive drugs and care.
The outcry from these folks will be like nothing US history has ever seen before. Congress would quickly exempt health care expenses from a high sales tax.
So the rate would have to be adjusted up — to 55%. Then auto manufactures willl have to get an exemption, or go out of business. New Home sales — will get an exemption. The 55 will go to 70.
The whole thing is a farce. Each of these groups will get exemptions BEFORE fairtax could be enacted. Therefore, it could not be enacted. No one is dumb enough to try a sales tax of 70%.
Published: February 5, 2008 11:28 PM
Mark Curran
Dont worry about 23- or 30%. for fair tax. Thats like asking if the magic pills will get you 100 miles a gallon, or 1000,
The answer is -- neither. Its poppycock,
Fairtax can not possibly work. It would have to be at least 60% -- and here is why.
For one thing — it pretends to tax the federal government, to pay the federal government Boortz writes “the federal government itself becomes a major taxpayer” Page 148.
This is a farce, it can not happen. Its like me saying I will tax myself 10,000 dollars a day. Oh, I can write a check for it, I can even deposit my own check in my own account. But at the end of the month, I dont have 300,000.
Incredibly, Fairtax thinks they will have 300,000.
For example, when the Fairtax makes the US Navy pay 4 billion in “sales tax” on a 12 billion dollar aircraft carrier — the Navy can write the check, The Treasury can even cash the check But the Treasury isnt a dime ahead. The treasury had to issue the money to cover the check.
This fallacy — one of many in Fairtax — means the 23% will have to be 35%.
Another major fallacy — Fairtax pretends it will be able to tax health care. That means cancer patients, stroke victims, nursing home patients, kidnes transplant patients — all of them will get huge tax bills. One cancer patient could easly get a tax bill for 50,000 in sales tax on their surgery and chemo,.
A single nursing home patient could easily be charged 25,000 in sales taxes per year. The parents of a child with luekemia could be charged 50,000 sales tax on expensive drugs and care.
The outcry from these folks will be like nothing US history has ever seen before. Congress would quickly exempt health care expenses from a high sales tax.
So the rate would have to be adjusted up — to 55%. Then auto manufactures willl have to get an exemption, or go out of business. New Home sales — will get an exemption. The 55 will go to 70.
The whole thing is a farce. Each of these groups will get exemptions BEFORE fairtax could be enacted. Therefore, it could not be enacted. No one is dumb enough to try a sales tax of 70%.
Published: February 5, 2008 11:28 PM
Jerry Citti
Mr. Curran presents two difficulties preventing the FairTax from working. The first, the fact that the federal government is itself taxed has already been dealt with. To refresh memories where necessary, the government is required under the FairTax legislation to pay the same tax as all purchasers of goods and services pay in order to keep it simple and in order to avoid giving the government a competitive advantage over private industry. The affect of assessing sales taxes on government purchases has already been factored into the 23 per cent rate and does not mean it must go to 35 per cent as Mr. Curran claims.
The second difficulty Mr. Curran presents is the problem of tax on medical expenses. Specifically he uses the deathly-ill-child-with-cancer example to assume that Congress will exempt medical expenses and thus require a huge increase in the tax in order to fully replace all the other taxes it supplants.
The short answer is that there will be many reasons for exempting one expense or another from the national sales tax. All of these must be resisted. Perhaps a super majority requirement for Congress to change the code would be one way to avoid exemptions.
The longer answer would be to advise/remind Mr. Curran that the actual price increase to be expected as a result of the 23 per cent sales tax remains to be seen. There seems little question that squeezing out all the embedded taxes in the system will reduce costs significantly so it is entirely possible that the tax will have little impact on prices. Still the cost of medical treatment is high anyway. It will probably always be a temptation to legislators to tinker with the system.
Such efforts must be resisted constantly; they will if successful lead to the same sort of system we have today.
Published: March 10, 2008 4:34 AM
Jerry Citti
Mr. Curran presents two difficulties preventing the FairTax from working. The first, the fact that the federal government is itself taxed has already been dealt with. To refresh memories where necessary, the government is required under the FairTax legislation to pay the same tax as all purchasers of goods and services pay in order to keep it simple and in order to avoid giving the government a competitive advantage over private industry. The affect of assessing sales taxes on government purchases has already been factored into the 23 per cent rate and does not mean it must go to 35 per cent as Mr. Curran claims.
The second difficulty Mr. Curran presents is the problem of tax on medical expenses. Specifically he uses the deathly-ill-child-with-cancer example to assume that Congress will exempt medical expenses and thus require a huge increase in the tax in order to fully replace all the other taxes it supplants.
The short answer is that there will be many reasons for exempting one expense or another from the national sales tax. All of these must be resisted. Perhaps a super majority requirement for Congress to change the code would be one way to avoid exemptions.
The longer answer would be to advise/remind Mr. Curran that the actual price increase to be expected as a result of the 23 per cent sales tax remains to be seen. There seems little question that squeezing out all the embedded taxes in the system will reduce costs significantly so it is entirely possible that the tax will have little impact on prices. Still the cost of medical treatment is high anyway. It will probably always be a temptation to legislators to tinker with the system.
Such efforts must be resisted constantly; they will if successful lead to the same sort of system we have today.
Published: March 11, 2008 6:41 PM
Jarod McElveen
I don't care what the rate is to make the FairTax revenue-neutral. If it takes 65% then it would just show American taxpayers the ridiculous amount of tax we are actually paying right now. That's just it, isn't it? It is a near mathmatical impossibility to calculate the amount of tax we each currently pay. Not so under the FairTax.
30% exclusive or 23% inclusive, I don't give a crap.
Think about it. Once it's on the table just how much the Fed gov't currently needs to fund all of its communist social programs and BS world poverty fighting, we'll again have an understanding of the stupidly huge size our Fed gov't has grown into. Then the American public will start screaming at Congress to stop wasting our money. Start actively using the accountability office to reduce fraud. Reduce government size.
Do you realize there are over 300,000 Fed government employees each carrying government credit cards? The Government Accountability Office just released a report showing nearly 41 percent of roughly $14 billion in credit-card purchases, whether legitimate or questionable, did not follow procedure.
I'm sick of paying for my elected officials' $300 haircuts and such.
Plus, this system will be soooo much cheaper to run, for the gov't and the public. Virtually no compliace costs at all, versus the $250 billion the public and corporate sectors spend per year JUST TO COMPLY.
Published: April 8, 2008 10:01 PM
NoGovNoTax
It will be just another Sunny Day on April 15th. Yes New cars will cost more than old cars, the've always have. Once everyone is used to the fairtax, (out-of-site) out of mind. Full paychecks. Supply and Demand will take hold and prices will drop. Sellers selling new product will pass the tax being simply the medium, because it's not a sales tax, it's a consumption tax. Everyone pays into it. The only tax arguement the Dems and Repubs can argue about is the percentage rate. Scrap the IRS(behemoth). I will choose weather I want to be taxed purchasing the Candy Apple or the Apple. This will become the norm and then become irrelative at a special interest level and The Dollar I earn becomes the dollar I keep and the purchase price I see is the purchase price I pay. Income tax will be a fairytail to tell the children.
Published: March 24, 2009 5:18 PM